Regulation and Deregulation Both Make Sense, at Different Times in an Industry's Lifecycle

In 1948, the Supreme Court ruled that five studios had monopolized the American film industry. Paramount, Warner Bros., MGM, RKO, and Fox owned the theaters that showed their own movies.

The court ordered them to sell.

For the next 72 years, the Paramount Consent Decrees kept the studios apart.

In August 2020, a federal judge terminated the decrees. The reasoning was that the market had changed beyond recognition.

Streaming had replaced theaters as the primary distribution channel. The studios were no longer dangerous monopolists. They were struggling incumbents.

Six years later, Paramount and Warner Bros. are merging. The deal is worth $111 billion including debt. The Justice Department approved it on June 12, 2026.

Two of the five studios that the Supreme Court forced apart are coming back together voluntarily. Not because they are too powerful, but because they are too weak to survive alone.

It’s a familiar story. Regulation is often designed to solve a specific market structure problem (monopoly power, natural monopoly characteristics, or high barriers to entry). 

Over time, technology, globalization, new business models, and substitute products can eliminate the original source of market power. Regulations that once made sense may then become unnecessary, counterproductive, or even protective of incumbents.

Industry	Original Monopoly Concern	Regulatory Response	What Changed?	Why Regulation Became Less Necessary
Railroads (1880s)	Railroads often held local transportation monopolies	Interstate Commerce Act of 1887 and creation of the ICC	Trucks, highways, pipelines, barges, airlines emerged	Railroads lost their transportation monopoly and faced extensive intermodal competition. The ICC was ultimately abolished in 1996. (PBS)
Airlines (1938–1978)	Fear that airlines would become monopolies and require centralized route and fare control	Civil Aeronautics Board regulated routes, prices, and entry	Industry matured; economists found regulation often restricted competition rather than promoting it	Congress passed the Airline Deregulation Act of 1978, eliminating most economic regulation. (Congress.gov)
Long-distance telephone service	AT&T dominance in national telephony	Rate regulation, entry restrictions, antitrust oversight	Fiber optics, microwave transmission, wireless networks, internet communications	Long-distance became highly competitive and prices collapsed. (Investopedia)
Telephone equipment	AT&T controlled devices connected to the network	FCC restrictions and later interoperability rules	Standardized interfaces and competitive equipment markets	Consumers now freely purchase phones and network devices from many suppliers. (WIRED)
Telegraph	Western Union's dominance	State and federal oversight of messaging services	Telephone, fax, email, messaging apps	Telegraph market essentially disappeared; monopoly concerns vanished with the technology itself.
Trucking (mid-20th century)	Concern about destructive competition and market concentration	ICC regulation of routes and pricing	Improved logistics, highways, nationwide competition	Most economic regulation was removed in the late 1970s and early 1980s. (LegalClarity)
Natural gas transportation	Pipeline monopolies in some regions	Extensive price and transportation regulation	Competitive gas production, spot markets, interstate trading hubs	Many pricing controls were relaxed as markets became more competitive.
Stock trading commissions	Dominant exchanges could maintain fixed commissions	SEC oversight and fixed-rate structures	Electronic trading and competing exchanges	Fixed commissions were abolished in 1975 ("May Day"), leading to intense competition.
Broadcast television	Scarce spectrum created limited competition	FCC ownership and content regulations	Cable TV, satellite TV, streaming services, internet video	The original scarcity rationale weakened substantially.
Local newspapers	Dominant local print monopolies	Special antitrust accommodations and ownership rules	Internet advertising, social media, digital news	Many newspaper monopolies disappeared due to competition from digital substitutes.

In the case of the studios, massive changes in the video and movie business make older restrictions unnecessary. 

Television was an alternative to “going to the movies, and therefore a threat. But studios discovered:

• TV licensing created new revenue

• Old film libraries became valuable assets

• Syndication emerged as a lucrative business. 

The additional changes in distribution (cable TV, home video, streaming) likewise emphasized the role of content ownership and creation for studios, even as new distributors emerged to capture value. 

Era	Largest Value Capture
Theater	Studios + theaters
Broadcast TV	Networks
Cable TV	Cable operators
DVD	Studios
Streaming	Platforms

Among the new issues with streaming is the importance of distribution versus “discovery,” as “scarcity value” migrates. 

Era	Scarce Resource
Theaters	Screens
Broadcast TV	Spectrum
Cable TV	Channel capacity
DVD	Shelf space
Streaming	Consumer attention

Frequently, the substitute products and competitors come from “outside” an industry’s chosen domain. 

Perhaps the classic example is railroads believing they were in the trains business, when they were actually in the transportation business. The substitutes did not come from inside the “railroad” business but from outside. 

Product	Apparent Monopoly	Important Substitute
Railroads	Railroads	Trucks, barges, airlines
Long-distance calls	AT&T	Mobile, VoIP, messaging apps
Broadcast TV	Local stations	Cable, satellite, streaming
Newspapers	Local newspaper	Internet and social media
Taxi medallions	Local taxis	Ride-sharing platforms
Video rental stores	Blockbuster	Streaming services

Each major distribution innovation created new winners, weakened existing gatekeepers, and shifted where revenue accumulated:

• broadcast television

• cable television

• home video

• DVD

• streaming. 

Era	Dominant Distribution	Key Gatekeeper	Main Revenue Source
1920s–1950s	Movie theaters	Theater chains	Ticket sales
1950s–1980s	Broadcast TV	TV networks	Advertising
1980s–2000s	Cable TV	Cable operators	Subscription fees + advertising
1980s–2010s	VHS/DVD	Retailers & studios	Unit sales/rentals
2010s–present	Streaming	Streaming platforms	Subscriptions
Emerging	AI-assisted distribution	Platforms & recommendation engines	Subscription + advertising + commerce

The point is that “where” monopoly danger exists will shift with time. And so must the regulatory concern.  Emerging industries might need one pattern. Declining industries virtually always need another: preventing concentration early; encouraging it in the industry decline phase.

Is Uber's Share of Ride Revenue Unfair?

It is easy enough to get an argument about the cost of using a marketplace such as the Apple App Store, Etsy or Uber. When Apple takes 15 percent to 30 percent of a sale, it can seem unfair to the seller. Uber’s take, said to be up to 50 percent in some cases, can seem usurious. 

But distribution, the roles in a value chain that move products or services from manufacturer to buyer, have a definite cost. 

And for some of us, a market maker or marketplace represents the cost of distribution. Seen that way, perhaps 30 percent is not unreasonable. 

Market makers, platforms and distributors all move goods between buyers and sellers. 

Function	Traditional Distributor	Marketplace / Market Maker (Uber, eBay, Etsy)
Takes ownership of product?	Usually yes	Usually no
Holds inventory?	Yes	No
Warehousing/logistics?	Major function	Usually little or none
Sets resale price?	Often yes	Usually seller sets price
Bears inventory risk?	Yes	No
Main asset	Physical network	Digital network
Revenue model	Gross margin on resale	Commission ("take rate")
Value provided	Physical distribution	Matching buyers and sellers
Scalability	Limited by physical assets	Highly scalable

A traditional distributor such as Sysco or McKesson buys products, stores them, transports them, and resells them.

A platform such as Uber, eBay, or Etsy generally does not own the underlying goods or services. Instead it creates a market, establishes trust, handles payments, provides discovery, and charges a fee.

The point is that platforms, market makers and distribution networks provide a similar function. 

From a value-chain perspective, both perform an intermediation function:

• "How do products get from factory to customer?"

• "How do buyers find sellers and transact safely?"

Both reduce search costs, transaction costs, and coordination costs.

The major innovation of digital marketplaces is that they perform many distribution functions without taking inventory ownership.

One could argue that Uber is a "virtual distributor" of transportation services, while eBay and Etsy are "virtual distributors" of goods.

So distribution represents a necessary part of any retail value chain. 

Research from the Reserve Bank of Australia found that for retail goods, roughly half of the final retail price reflects wholesale and retail distribution margins and costs. 

But distributor profits themselves were less than 10 percent of final sale price.

Final Retail Price = $100	Share
Manufacturing cost	$50
Wholesale distribution costs and margin	$15
Retail costs and margin	$35
Final consumer price	$100

Industry	Distributor Margin
Electronics	3%–10%
FMCG/Grocery	3%–10%
Industrial products	10%–20%
Medical products	20%–30%+
Apparel	15%–30%
source: Unanswered

Digital marketplaces usually charge commissions ("take rates") rather than earning resale margins.

Platform	Approximate Take Rate
Etsy	~6.5% transaction fee plus payment and advertising fees; effective cost often 10%-20%+ for sellers (Reddit)
eBay	Often around 10%-15% depending on category (Business Insider)
Uber	Company reports roughly 20%+ take rates, though some external studies estimate substantially higher in certain markets (Business Insider)

Looked at that way, take rates or distribution costs are quite similar. 

Role	Typical Share of Final Transaction Value
Physical distributor profit	3%-30%
Marketplace take rate	10%-30%
Combined wholesale + retail distribution system	Often 30%-50%+
Uber/eBay/Etsy platform fee	Often 10%-30% (50% in some cases for Uber)

Industrial Products	Digital Era Products
Scarcity = moving products	Scarcity = matching participants
Value = logistics	Value = network effects
Advantage = warehouses	Advantage = users and data

In economic terms, platforms replace physical intermediation with information intermediation.

So we move from:

Manufacturer → Distributor → Retailer → Consumer

to:

Producer → Marketplace → Consumer. 

As a result, a 10 percent to 20 percent marketplace fee can sometimes replace a traditional channel structure that consumed 30 percent to 50 percent of the final selling price.

source: Len Sherman 

In other words, a 30-percent take rate for sellers on a platform or marketplace might seem out of line, but might not actually be usurious.